In this post I discuss the catchall nonprofit classification of “local development”.  I muse on the methods of classifying nonprofits.  And I note the use of the term “community infrastructure” in the DRCD baseline data collection on social enterprises.

In the old days before Covid, we would be assembled once a year to hear the Benefacts annual review.  This was one of those events where one obligingly sat in rows and hoped to hear something of interest. Quite often one was not disappointed.  However one statistical smidgeon was regularly trotted out and would grate on my ear.  It was that 27% of nonprofit companies limited by guarantee were engaged in “Development”.  

I have since shaken out the Benefacts data, using a publicly available dataset downloaded in early 2022 before they closed up shop* and had a closer look at the CLGs classified under “Development”.  This classification comprises five sub-categories:

** Local development 1811 organisations

** Job creation 445 organisations

** Social enterprise 192 organisations

** Sheltered housing 62 organisations

** Social housing 268 organisations

Benefacts has used a hibernicised version of the International classification of “nonprofit organizations”, devised in the 1990s by Lester Salamon et al from John Hopkins University in the USA.  In America housing and development are connected functions in the third sector, hence the grouping together here.  So for our purpose today we can set aside the housing NPOs.  Of the 2400+ remaining NPOs, some 192 are listed as “social enterprises” and 445 as “job creation” nonprofits.  These two classifications deserve a separate particle to explain (patiently and without rancour) why these are at best misleading.

This leaves 1811 “local development” nonprofits.  Scanning down the list, I concluded that few seemed were engaged in the business of actual local development as described by the OECD: to “build the capacity of a defined area to improve its economic future and the quality of life for inhabitants”.  Rather, this subset seemed to include local organisations of rather general community benefit: every community centre and parish hall the length and breadth of the country, some community development associations and some mis-labelled organisations in childcare and social services.  Some – but only some – of the 1811 seemed to be engaged in any kind of developmental activity.  True, this list did include some local development companies – but equally I found some other LDCs listed under “Job Creation” and “Social Enterprise”.  

So what is happening here?  Here are my considered reflections.  First, classification is difficult.  There is a temptation (I see it all the time) to try to treat nonprofits like plants and animals in the natural world, where a species lies within a genus, within a family, within an order.  But in real life, a nonprofit may have multiple, valid classifications.  Take the case of a social enterprise that provides disability transport and receives funding from the Community Services Programme or workers from Community Employment.  It could be equally classified as a social service or a social enterprise or a job creation NP.  Using standard industrial classification, its SIC code would probably be that of a transport company.  And they could be a registered charity as well.  So which, if any, classification takes precedence?

Second, what data source does one use to classify an NPO?  In the case of Benefacts they used an organisation’s governing documents, i.e. their constitution or Memo and Articles.  Have you ever read a CLG constitution?  It is easy to see that a local community centre might be set up with very general and aspirational objectives but over time would end up focusing their activities on sport, or recreation, or youth work, or playgroups. 

Third, I’m wondering if Ireland has many more community centres, halls, facilities, local associations and other local activities than other countries.  I met some Swedish nonprofit managers this year and they looked spectacularly blank when I talked about the central role of community centres in Irish society, especially the rural context.  And so these organisations get dumped in with “local development” –  in this context probably intended by the American originators to mean something like “a bit like international development but here and local”.  

Fourth, the DRCD social enterprise baseline data collection project uses the term “community infrastructure” for local halls and community facilities.  This is a handy term – although perhaps still a bit technical for the lay reader – and Benefacts would do well to adopt it.  “Development” is a good word and deserves to be properly treated rather than risk being diminished through being splashed around at anything local which defies categorisation.  

* Happily the Benefacts Legacy Project continues and has been funded by philanthropy here. 

Danielle Byrne, (C) 2023

In this ‘particle’, I take a quick ramble around my head on one of the most taken-for-granted terms in social enterprise discourse: “traded income”.  These are simple words and relate to income derived from selling goods and services but I seldom see the topic discussed in academic literature or in the social enterprise eco-system. So, here I try to give the subject of traded income a bit of an airing.

My first thesis is that ‘traded income’ is more than the money you earn from selling goods and services. In trying to pin down what constitutes “traded income” I start with monies from the state – too often assumed to be ‘just’ grant funding. Sometimes this is clearly earned income when a contract is subject to competitive tender and can be considered a commercial transaction.  Conversely, funding is equally clearly not earned income when awarded by the state to a nonprofit as a grant or from a service contract agreed on an, ah, historic basis (health and social services funding seems to be full of these).  But in the middle of this apparent clarity there are other state funding streams that involve an element of competitive selection and a specified service level – but is this enough to constitute a market transaction of the provision of goods and services?   And then, I also come across nonprofit managers who, when they have a new idea, they’ll be off to pitch to funders in government departments and agencies; they treat the state as marketplace for their services.  Where are the boundaries here?

Do subscriptions count as traded income? If you pay a subscription to a trade union or a professional body or a historical association,  I bet you won’t be thinking of it as traded income.  But a subscription may refer to a direct transaction: I have bought newspapers, wine and coffee on subscription.  More subtly, an arts ‘membership’ subscription may present as a philanthropic donation but involve a transactional benefit – a discount, say,  or admission to member-only events.  Where are the boundaries here?

I’ve come across nonprofits who enjoy “sponsorship” income.  This may not sound like earned income.  But sponsorship in the community radio sector is mighty close to advertising income – and that sounds like earned income to me.  And in sport sponsorship – is there no mutual benefit or effective transaction? Where are the boundaries here?

And just what do we mean by “fees”?   Doctors, schools, childcare facilities, architects, lawyers, mental health counsellors, all charge fees and that seems to be based on a clear transaction of services.  Yet, I’ve come across nonprofits that charge fees – childcare providers for example – who consider this as a contribution to a service but do not believe that they have a market-based relationship with the fee-payer.  Where are the boundaries here?

Rent. No argument here. The payment of rent for work space or for the casual hire of a meeting room is clearly traded income. But my point is that it is often incidental to a main social purpose and, so, overlooked by companies when reporting their traded income.

Finally, I’m concluding this particle in a small crisis of confidence. Should I be writing about “trading income” rather than traded income? Or earned income? And can anyone tell me the difference?

© Danielle Byrne, 2023

Some of my Particles are, as I admit elsewhere, little more than random thoughts or vague recollections.  Here is one such.

I was at one of those events where you sit in a row and listen to people who are trying to think up something – hopefully interesting – to say to you.  This chap was talking intelligently and cogently about “administration”.  The gist of his address was that, far from wanting to minimise the cost of administration in a nonprofit,  he thought that money spent on good governance, on training board members, and on ensuring financial probity, and on sound planning and financial management, was to the benefit of the organisation, its mission and the sector overall.

If you go to Google and Google Scholar and type in “nonprofit administrative costs” you will find endless articles, some assuming a benefit to the ultimate beneficiary when a nonprofit minimises organisational spend and others correlating a higher (maybe not that much higher) spend on administration with greater overall effectiveness.  All this is very interesting.  However, my memory is long.  

I remember a time when no one talked much about nonprofits and their overheads and admin costs.  Then one day – I’d like to think it was in the mid 1990s – someone looked at the audited accounts of a major UK charity and found that it reported 80% of their income spent on administration.  And the accounts of other charities were looked at.  And there blew up an almighty storm of self-righteous outrage.  And I suspect that this is where and how the debate around administration as a percentage of turnover gathered pace.

All this time, I have had a nagging feeling that the wrong tree was being barked up.  In remembering that time when no one talked much about nonprofits and overheads, I also recall that no one paid much attention to audited accounts either.  The auditors came, they worked, and they produced a set of accounts in a language that only they understood.  Their financial statements were only ever properly read or challenged by the honorary Treasurer.  Final versions were approved, signed and consigned to the filing cabinet**.  At the time my view was that when auditors wrote things like “administration” what they really meant was the operation of the organisation as opposed to direct costs or marketing.  I didn’t for a moment think that auditors necessarily meant unnecessary bureaucracy or clerical bean-counting.  But it made for an easy news story. No one spoke up and indeed it would have been futile to do so: once the words were uttered, they touched a nerve that was waiting to be touched, and they could not be unspoken…

I have a second thought to add. Which is that it can suit some nonprofits to complain about “unnecessary admin” when asked to account for their use of public funds. Whether the reporting requirements of public bodies are reasonable or not, is an interesting but quite different question. My point is that I have certainly seen a very few vocal nonprofits – especially in Ireland – hide behind the “bureaucracy gone mad” trope rather than admit their own shortcomings. And this too plays to the gallery of public opinion.

So here we are, stuck with a supposed universal truth that nonprofits and charities are just waiting to spend your hard-earned donations on pointless admin.

**  I have yet to write my post “a set of audited accounts is like a good novel”

Danielle Byrne, © 2023

Here in the space reserved on this site for blog posts, I publish my Particles. Too short, too informal, too unacademic, too arbitrary to warrant publication elsewhere, these are my random thoughts and recollections. Sometimes, there may be a touch of research underpinning a post. Sometimes, the particle may originate in an observation arising from research. Sometimes, the particle may aim to provoke. Sometimes (and really quite often) I am only scratching an itch.

Data published this year by the Department of Rural and Community Development cites over 4000 social enterprises in Ireland. Yet less than ten years ago the figure of 1420 social enterprises was published. Has there been an explosion in the number of social enterprises? Or is it just a question of the method of counting? This particle looks at the origins of the 1420 figure. 

In 2014 the former semi-state body Forfas published the estimate of 1420 social enterprises in Ireland.  The Forfas report was important, indeed seminal, in paving the way for the current social enterprise policy in Ireland.  The report’s authors obtained the figure of 1420 from a report published by Clann Credo ‘The Economic and Social Contribution of Clann Credo – the Social Investment Fund, December 2011’.   Section 4 (p.29) of that report stated that it “presents a brief description of the wider SECB [social enterprise and community business] sector in Ireland, utilising a new, comprehensive database compiled specifically for this study”.  They go on to explain that Clann Credo and their consultants DKM commissioned a dataset from INKEx, which was the precursor organisation to Benefacts. The methodology for obtaining the data is set out in Appendix 1 of the Clann Credo report and reads: 

“Clann Credo commissioned INKEx to perform a data analysis of the Irish Nonprofits Database that was focused specifically on the SECB sector. This was ensured by selecting companies that:

• Were Limited by Guarantee and

• Were registered as a charity

The final list excludes overseas charities, hospitals, hospices, churches, schools, banks, and national bodies and interest groups. It was checked line by line to make sure that it was as comprehensive as possible and captured the SECB sector only. Some additional lists were incorporated, containing companies in receipt of Pobal grants, community associations registered with Muintir na Tire and a list of Clann Credo clients.”

Note that this was written before the creation of the Irish Charities Regulator and  “registered as a charity” would have referred to registration of a CHY number with Revenue. 

The Clann Credo report tells us that an “iterative process of refining the listing ultimately resulted in a directory of 1,420 SECBs in operation in 2009. We are confident that this is the most up-to-date and comprehensive listing of the sector in Ireland available to date.”  While this list of 1420 organisations must have been interesting, it is difficult to reconcile the methodology of data collection with any definition of social enterprise in use at the time or currently. By its own account, the listing excluded CLGs without a CHY number. And it must have missed any and all social enterprises operating as CLGs without charitable status, limited companies, cooperatives (Industrial and Provident Societies) and other legal forms. 

PS The same Clann Credo report cites average trading income at 17% of turnover.  That figure is incorrect.  I discuss trading income in a further blog post here.

© Danielle Byrne, 2023

Most of the population of the 2019 study readily fit the basic premise that an organisation is co-terminous with a legal entity.  By this I mean that your organisation is typically a company limited by guarantee but sometimes a co-operative, association or other form, and that your people, activities and resources are all contained within company, co-op or association.

However, a number of “organisations” in the Irish nonprofit sector comprise two or more legal entities – which are co-managed as a single organisation.   By “co-managed” we mean that there is significant overlap of board members or that the manager or CEO leads both/all legal entities.  In a few instances members of the staff team may work, or the financial resources may be deployed, across multiple legal entities.  This situation arises for a couple of reasons:

• Some government funders will only fund a company limited by guarantee so an association may set up a company but retain their original form as a parent or sister organisation.  Or some funders will require that a separate company is set up to deliver a specific programme.
• Charities sometimes set up limited companies as a trading subsidiary to undertake work that does not fall within the charitable remit or the Charity Regulator’s restrictions.
• Sometimes a nonprofit may choose to set up a separate legal entity to undertake new or diversified work.

In order to assure consistency and comparability across all the cases examined by this study, we are looking at the legal entity identified by Benefacts and as specified in each email to would-be respondents.  However, we aim to identify multi-entity organisations in the survey and may explore these further at a future stage of the research.  If you have any questions about the boundaries of your organisation, please contact Danielle Byrne at byrned49@tcd.ie.

Published in The Conversation – “an independent, not-for-profit media outlet”  – a thought provoking article on systems change for climate change by Sheila Cannon, assistant professor of social entrepreneurship, from the Trinity Centre for Social Innovation.